Karkare v. International Ass’n of Bridge, Structural, Ornamental & Reinforcing Iron Workers Local 580, No. 22-2874, __ F.4th __, 2025 WL 1618132 (2d Cir. June 9, 2025) (Before Circuit Judges Sullivan, Robinson, and Kahn)

ERISA is a minefield for almost every plaintiff, but medical providers probably face the biggest navigation challenge. As we have discussed in the past, benefit plans and their insurers have countless defenses when providers try to sue them for not paying or underpaying medical bills. Plans can assert (1) inadequate standing, (2) anti-assignment provisions, (3) failure to exhaust administrative remedies, and (4) federal preemption, among other more typical litigation defenses.

Perhaps the most vexing defense is the first and most important one: standing. ERISA allows for a private right of action against plans to “recover benefits,” but only by “a participant or beneficiary.” 29 U.S.C. § 1132(a)(1)(B). Providers, of course, are neither participants nor beneficiaries. As a result, providers have tried numerous arguments to justify suing under this provision, with limited success.

This week’s notable decision involves one of those methods: obtaining a power of attorney. The plaintiff in the case was Dr. Nakul Karkare, a surgeon affiliated with AA Medical, P.C. In 2022, another surgeon at AA Medical performed knee surgery on a patient, referred to as Patient JN. Patient JN was a beneficiary of the defendant benefit plan; AA Medical was out-of-network.

AA Medical submitted an invoice to the plan for the treatment, for a total of $153,579.94. The plan only paid $1,095.92, contending this was sufficient under its out-of-network provision which provides reimbursement “based on…the customary charge or the average market charge in [the patient’s] geographical area for a similar service.” AA Medical appealed, but to no avail.

Undeterred, Dr. Karkare obtained a power of attorney from Patient JN and filed this action, alleging that the plan violated its obligations under 29 U.S.C. § 1132(a)(1)(B). The district court immediately leaped into the fray, ordering Dr. Karkare sua sponte to show cause why the case should not be dismissed because of the plan’s “requirement that a physician must demonstrate a valid assignment of a claim from a beneficiary to maintain a cause of action for unpaid benefits under ERISA[.]”

Dr. Karkare responded that no assignment was necessary because he had a power of attorney from Patient JN. The district court did not agree, dismissed the case, and denied Dr. Karkare’s motion for reconsideration. Dr. Karkare appealed to the Second Circuit Court of Appeals, which issued this published decision.

The Second Circuit observed that it was “not entirely clear from the district court’s one-paragraph docket order dismissing the complaint whether the district court concluded that Karkare lacked constitutional standing, a statutory right to bring a cause of action under section 502(a), or both; the district court’s order cites various cases that address the two concepts.”

The court further noted that Dr. Karkare’s status as a provider – and not “a participant or beneficiary” – was not necessarily fatal to his statutory claim, because the federal courts “have recognized a limited exception permitting ‘physicians to bring claims under [section] 502(a) based on a valid assignment from a patient[.]’”

However, the Second Circuit emphasized that statutory rights must take a back seat to constitutional standing under Article III, and thus began its analysis there. The court recited the familiar elements of constitutional standing: “(1) an ‘injury in fact,’ defined as ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent’; (2) a sufficient ‘causal connection between the injury and the conduct complained of’; and (3) a likelihood that ‘the injury will be redressed by a favorable decision.’”

The court noted that Dr. Karkare “does not argue that he has suffered any direct injury…[n]or can he, since the complaint alleges that another physician treated Patient JN on behalf of a corporate entity, AA Medical, that was the party entitled to the outstanding treatment fees.” Dr. Karkare did not explain in his complaint what “the precise contours of his affiliation with AA Medical were,” but regardless, “Karkare does not have standing to assert claims for any injuries suffered by that corporate entity, even if he was ‘personally aggrieved’ by the Union’s conduct and ‘may have faced the risk of financial loss as a result.’”

The Second Circuit noted that Dr. Karkare’s “theory of constitutional standing appears to be that he is suing purely in a representative capacity on behalf of Patient JN” pursuant to the power of attorney. However, according to the court this did not align with the allegations in Dr. Karkare’s complaint, which “indicate that Karkare is in fact suing in his own name and for his own benefit[.]”

The court stressed, “Our precedent is clear that a power of attorney does not confer Article III standing on the attorney-in-fact to file suit in the attorney-in-fact’s own name, even if the suit is purportedly brought on behalf of the grantor of the power-of-attorney.” Thus, the court stated that Dr. Karkare’s power of attorney only allowed him to “act as an agent or an attorney-in-fact for the grantor,” i.e., Patient JN, and did not give him “legal title to, or a proprietary interest in, the claim.” (The court noted that this analysis would be different if Dr. Karkare had an assignment from Patient JN, which would transfer legal title of the claims in question and would give him constitutional standing.)

In short, because Dr. Karkare brought the action “in his own name and for his own benefit (or that of AA Medical),” and not on behalf of Patient JN, for whom he was purporting to act, the Second Circuit concluded that he “lacks Article III standing.” Thus, the “district court lacked subject-matter jurisdiction to adjudicate this dispute,” and “dismissal of the complaint, without prejudice, was warranted.”

The Second Circuit was not done, however. The court observed that “since, based on the complaint, it seems likely (if not a near certainty) that Patient JN has standing to maintain the ERISA claim at issue here,” the court remanded to the district court “to permit Patient JN to move to be substituted into the action or to otherwise submit an amended complaint that properly asserts the ERISA claim on behalf of Patient JN.”

The Second Circuit noted that further proceedings would likely involve additional motions and rulings, including further investigation into the nature of the power of attorney, but the court declined to weigh in on those issues in advance: “we leave it to the district court to decide these (and any other related) questions in the first instance.”

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Breach of Fiduciary Duty

Tenth Circuit

Chavez-DeRemer v. Ascent Construction, No. 24-4072, __ F. App’x __, 2025 WL 1638134 (10th Cir. Jun. 10, 2025) (Before Circuit Judges Bacharach, Carson, and Rossman). The United States Department of Labor (“DOL”) brought this action against Ascent Construction, Inc., Bradley L. Knowlton, and the Ascent Construction, Inc. Employee Stock Ownership Plan, alleging that the fiduciaries breached their duties and engaged in prohibited transactions by misappropriating plan assets and otherwise mishandling the plan. In its complaint, the DOL requested a permanent injunction removing Knowlton and Ascent from their positions as trustee and plan administrator and appointing an independent fiduciary in their stead. After discovery commenced, defendants stopped actively participating in the litigation. In late January 2024, the DOL moved for discovery sanctions. The district court subsequently ordered defendants to show cause for their failure to timely answer the amended complaint and to obey its orders compelling a response to the DOL’s interrogatories. The district court warned that further compliance failures could result in a default judgment against them. When defendants’ behavior continued, the district court concluded that they willfully failed to engage in the litigation process and comply with its orders, prejudicing the DOL and interfering with the judicial process. As warned, the district court entered a default judgment against defendants under Federal Rules of Civil Procedure 16(f)(1)(C) and 37(b)(2)(A)(vi) in the amount of $288,873.64. The court also entered a permanent injunction barring Knowlton and Ascent from serving in their respective roles, and appointing an independent fiduciary whom the court authorized to terminate the plan and commence a claim submission process for the participants. Defendants appealed the district court’s entry of default judgment and the permanent injunction. The Tenth Circuit affirmed in this unpublished per curiam decision. The court of appeals found that the district court had not abused its discretion in finding the defendants’ disobedience of its orders willful. It agreed with the lower court that defendants never, including on appeal, offered any reason why they were unable to comply with the January 29, 2024 deadline to file an answer and respond to the discovery requests, or argue that their noncompliance was in any way involuntary. The appeals court further agreed that lesser sanctions would have been ineffective because defendants “continually refused to participate in [the] litigation.” Thus, the Tenth Circuit concluded that the district court acted well within its discretion to enter default judgment under the circumstances. Moreover, the court of appeals agreed with the district court’s decision to enter a permanent injunction to prevent any further unlawful handling of the Plan’s funds. “By removing Knowlton and Ascent as Plan fiduciaries, the injunction reasonably seeks to prevent additional ERISA violations that would likely make it impossible for the Plan to timely pay claims or distributions to its beneficiaries.” Removing Knowlton and Ascent as fiduciaries of the plan, the court added, is not only authorized by ERISA, but consistent with its purposes. For these reasons, the Tenth Circuit affirmed the district court’s entry of default judgment and permanent injunction.

Disability Benefit Claims

Fourth Circuit

Penland v. Metropolitan Life Ins. Co., No. 24-1772, __ F. App’x __, 2025 WL 1672861 (4th Cir. Jun. 13, 2025) (Before Circuit Judges Wynn, Harris, and Benjamin). Plaintiff-appellant Tracy Penland sued Metropolitan Life Insurance Company (“MetLife”) under ERISA seeking restoration of his long-term disability benefits. Under the policy, disabilities due to musculoskeletal disorders, excluding radiculopathy, are limited to a maximum benefit duration of 24 months. MetLife terminated Mr. Penland’s benefits in January 2021, concluding that he had received the maximum lifetime disability benefits and that medical records did not support the presence of non-limited conditions that prevent him from performing any gainful occupation. After he exhausted the claims appeals process, Mr. Penland challenged MetLife’s decision in court. First, the district court issued a ruling on summary judgment finding in favor of MetLife. Mr. Penland appealed. The Fourth Circuit overturned that decision under its rule favoring resolution of ERISA benefit cases using Rule 52 bench trials, established in Tekmen v. Reliance Standard Life Insurance Co., 55 F.4th 951 (4th Cir. 2022). On remand from the Fourth Circuit, the court followed the appeals court’s directive and issued findings of fact and conclusions of law under Federal Rule of Civil Procedure 52. Once again, it affirmed MetLife’s denial of Mr. Penland’s claim. Mr. Penland appealed again. This time, the court of appeals found no clear error with the court’s finding and affirmed it in full. At the outset, the Fourth Circuit stated that this appeal “solely concerns the question of whether the terms of the plan provide for Penland’s continued receipt of long-term disability benefits or whether those terms preclude coverage due to the lifetime-maximum-coverage provision.” Ultimately, the Fourth Circuit found that Mr. Penland could not establish ongoing disability due to non-limited conditions. Mr. Penland first argued that the district court erred by interpreting the plan’s limitation provision to require him to prove disability without reference to the limited medical conditions. “In other words, Penland believes that the limitation provision only takes effect if limited conditions are the sole cause of a claimant’s disability.” But the appeals court did not agree. It found that adopting Mr. Penland’s stance would “render the provision all but meaningless.” Mr. Penland also argued that he presented objective evidence of radiculopathy, such that the limitation provision should not apply. But again, the court of appeals was not convinced. It concluded that the district court correctly held that the record does not include objective evidence of radiculopathy and that it was proper for the lower court to credit MetLife’s reviewing physicians’ determination that Mr. Penland did not have radiculopathy. Finally, the Fourth Circuit disagreed with Mr. Penland that the district court committed clear error by finding he failed to meet his burden of showing disability under the plan. He claimed that the district court erred by deciding that his non-limited health conditions leave him able to earn more than 60% of his pre-disability earnings. The appeals court concluded, however, that there was ample evidence to support MetLife’s, and the district court’s finding, to the contrary. Based on the foregoing, the court of appeals affirmed the judgment of the district court.

Wonsang v. Reliance Standard Life Ins. Co., No. 24-1419, __ F. App’x __, 2025 WL 1672860 (4th Cir. Jun. 13, 2025) (Before Circuit Judges Wilkinson, Wynn, and Richardson). Plaintiff-appellee Rebecca Wonsang filed this action against Reliance Standard Life Insurance Company seeking judicial review of its decision to terminate her long-term disability benefits under a group policy provided by Reliance. On summary judgment, the district court concluded that Reliance’s decision was erroneous. It granted summary judgment in favor of Ms. Wonsang. The court held that de novo review applies, rather than abuse of discretion, because Reliance violated ERISA’s procedural requirements that it issue a decision on appeal within 45 days and therefore forfeited its discretionary authority under the policy. The district court further concluded that Reliance’s decision could not be upheld under either standard of review. It reasoned that Reliance cherry-picked evidence in the medical record and ignored the findings and opinions of Ms. Wonsang’s treating physicians. It explained that even crediting the evidence cited by Reliance, it could not overcome the volume of undisputed medical documents and test results establishing the severity of Ms. Wonsang’s disabling conditions. Finally, the district court rejected Reliance’s request for a remand to consider the applicability of a limitation for self-reported conditions. The district court stressed that the record was replete with MRI imaging verifying the severity of Ms. Wonsang’s spinal impairment and, as a result, it was clear the self-reported conditions limitation did not apply. Reliance appealed all aspects of the district court’s decision. In this unpublished opinion, the Fourth Circuit affirmed. First, the court of appeals addressed the district court’s decision to resolve the case at the summary judgment stage. In Tekmen v. Reliance Standard Life Insurance Co., 55 F.4th 951 (4th Cir. 2022), the Fourth Circuit held that a district court may conduct a Rule 52 bench trial to resolve disputes issues of material fact in ERISA denial of benefit cases. The court of appeals ruled that in the present matter “the evidence of disability did not admit of a genuine dispute, and the district court did not err in proceeding accordingly.” Thus, the court disagreed with Reliance that the lower court’s approach was inconsistent with Tekmen. The Fourth Circuit then reached the merits of the district court’s decision. Reliance primarily argued that the district court erred in applying de novo review. The Fourth Circuit declined to resolve this issue given its conclusion that “Reliance’s decision does not withstand scrutiny even under the less rigorous abuse of discretion standard.” The appeals court noted that it was “undisputed that every physician who considered Wonsang’s ability to work concluded she ‘was not capable of any work.’” Moreover, these opinions were based on objective testing, including MRIs, which showed that Ms. Wonsang suffered from “cervical instability.” Although Reliance was not obligated to credit these opinions, the Fourth Circuit was clear that at a minimum it needed to address them and engage with evidence in the medical record that conflicted with its decision. The court found it did not do so. Nor did it “engage in a deliberate, principled reasoning process.” To the contrary, each piece of evidence that Reliance relied upon to reach its decision to terminate benefits either supported Ms. Wonsang, or at the very least did not cut against her claim that she cannot perform sustained activities due to severe spinal damage. Simply put, the court wrote, “Reliance has done nothing to call this evidence into question.” The Fourth Circuit also agreed with the district court’s decision not to remand to Reliance as it concluded that “[n]o purpose would be served by remanding here.” For these reasons, the court of appeals affirmed the judgment of the district court in its entirety. However, Circuit Judge Richardson dissented. Judge Richardson disagreed with his colleagues on the panel about the district court’s decision to resolve the case on summary judgment. He argued that this case presented genuine disputed issues of material fact, and that, under Tekmen, he would vacate and remand for a bench trial without deference to Reliance.

Seventh Circuit

Oye v. Hartford Life & Accident Ins. Co., No. 24-2925, __ F. 4th __, 2025 WL 1659281 (7th Cir. Jun. 12, 2025) (Before Circuit Judges Easterbrook, Brennan, and Scudder). Plaintiff-appellant Olayinka Oye applied for long-term disability benefits through her ERISA-governed plan insured and administered by Hartford Life and Accident Insurance Company. Ms. Oye asserted that symptoms caused by fibromyalgia prevented her from continuing her work as a director at PricewaterhouseCoopers and performing the essential duties of that job. Hartford initially denied Ms. Oye’s claim. However, on her appeal of the initial denial, Hartford reversed course and found her disabled within the meaning of the plan. After she began receiving benefits, Hartford had another change of heart and terminated her benefits, finding her no longer disabled. Hartford upheld this denial during the internal appeals process, prompting Ms. Oye to sue under ERISA, hoping to reinstate her long-term disability benefits under the plan. The parties agreed to a paper trial under Rule 52(a). Because the plan did not give Hartford discretionary authority regarding benefit eligibility, the court applied de novo review. Ultimately, the court concluded that while the record evidence clearly showed Ms. Oye’s fibromyalgia caused her pain and limited her abilities, it did not support a finding that her condition rendered her unable to continue her work at the accounting firm. “Most persuasive, the district court reasoned, was that three of Hartford’s medical reviewers concluded in detailed consultative reports that Oye’s medical records and physical exams did not support her claim of complete disability. These reports, the court explained, belied the brief and conclusory letters from Oye’s treating physicians, which described Oye’s condition as totally disabling.” The district court entered judgment in favor of Hartford. Ms. Oye appealed the unfavorable decision. At the outset, the Seventh Circuit stated that the district court “approached its review exactly the right way, owing no deference to Hartford’s prior decisions.” Given the de novo standard of review, the court of appeals held that the district court acted appropriately by affording no weight to Hartford’s prior finding that Ms. Oye was disabled. As for the merits of the district court’s decision that Ms. Oye failed to meet her burden of establishing eligibility under the plan, the Seventh Circuit found no clear error. It noted that the lower court had articulated why it afforded the weight it did to the opinions of Hartford’s consultative doctors. Ms. Oye argued that the district court had erred by crediting the reports of doctors who never examined her over reports from her treating physicians. But the Seventh Circuit stated that its role is not to decide as a matter of first instance which doctor offered the most credible opinion, but rather to assess whether the district court’s decisions were clearly erroneous. It found they were not. “The district court explained at length why it credited the more reasoned reports. The law required no more.” Finally, the court of appeals disagreed with Ms. Oye that the district court erred by failing to discuss a relevant piece of evidence, stating, “the district court had no legal obligation to discuss each piece of evidence in the record.” Moreover, because the medical document at issue predated the period of time on which the district court focused its discussion, the appeals court noted that the district court’s decision to forgo discussion of it made sense. In sum, the Seventh Circuit held that the district court provided adequate reasoning and issued an ultimate decision that was “plausible in light of the record viewed in its entirety.” Thus, the Seventh Circuit affirmed.

ERISA Preemption

Second Circuit

Office Create Corp. v. Planet Ent., LLC, No. 24-1879, __ F. 4th __, 2025 WL 1634970 (2d Cir. Jun. 10, 2025) (Before Circuit Judges Calabresi, Chin, and Merriam). Plaintiff-appellant Office Create Corporation brought this action as a petition to confirm an arbitration award it had won against defendants-appellees Steve Grossman and Planet Entertainment, LLC. The district court granted Office Create’s petition and entered judgment in its favor. Following that decision, Office Create served an information subpoena and restraining notice on Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill”), seeking to restrain certain accounts in which it contended Grossman had an interest. Five of the Merrill accounts Office Create flagged, which held about $2 million in assets, were designated as retirement case management accounts and were governed by ERISA. Mr. Grossman served an exemption claim form on Office Create, arguing that these accounts were exempt from collection because they were pension and retirement accounts whose assets were protected by ERISA’s anti-alienation provision. Office Create had other thoughts. Relying on a New York state law, New York Civil Practice Law and Rules (“NYCPLR”) Section 5205(c)(5), Office Create contended that these assets could be used to satisfy its money judgment if the funds were deposited into retirement accounts during a ninety-day look-back period. Office Create maintained that because the arbitration proceedings underlying the judgment commenced on April 6, 2021, and the Merrill retirement case management accounts were opened after January 6, 2021, the funds in the accounts are exposed to collection under the New York law. Office Create sought a ruling from the district court agreeing with it. It did not get one. Instead, the district court agreed with Mr. Grossman that Office Create could not go after his ERISA-governed retirement funds. The court held that ERISA preempts NYCPLR § 5205’s 90-day look-back exemption, meaning the money in the Merrill accounts at issue is exempt from collection under ERISA’s anti-alienation provision. Office Create appealed that decision. Before the Second Circuit addressed the merits of the lower court’s preemption ruling, it first considered whether it even had appellate jurisdiction over the matter. The district court had issued a non-final order. Its denial was without prejudice and allowed Office Create to request a hearing to further litigate the matter. However, the district court’s order was clear that if Office Create did not seek a hearing, its decision would be with prejudice, and thus appealable. Office Create agreed to withdraw its request for an evidentiary hearing, which rendered the district court’s order final. The Second Circuit accordingly proceeded to review the merits, confident that it could properly exercise jurisdiction over the appeal. The Second Circuit’s discussion of preemption was straightforward. It was clear to the court that Congress had a “clear and manifest purpose” in enacting ERISA’s anti-alienation provision, which was to protect pension funds, including against collection by creditors. “Both the plain language of ERISA and the precedent interpreting it make clear that pension plan funds are exempt from attachment to satisfy a money judgment.” The exemption in NYCPLR § 5205 which opens up pension funds for collection, the Second Circuit determined, presents a direct and obvious conflict with ERISA’s anti-alienation provision. Accordingly, the court of appeals agreed with the district court that the state law is preempted by ERISA, and the funds at issue cannot be used to satisfy the money judgment. Thus, the Second Circuit concluded that the district court did not err in denying Office Create’s objection to Mr. Grossman’s claim of exemption as to his Merrill retirement accounts. Based on the foregoing, the Second Circuit affirmed the judgment of the district court.

Ninth Circuit

Abira Med. Lab., LLC v. Anthem Blue Cross Life & Health Ins. Co., No. 2:25-cv-03220-WLH-RAO, 2025 WL 1664596 (C.D. Cal. Jun. 12, 2025) (Judge Wesley L. Hsu). Plaintiff Abira Medical Laboratories LLC, filed this action in state court against defendants Anthem Blue Cross Life and Health Insurance Company and Blue Shield of California alleging claims for breach of contract, breach of implied covenant of good faith and fair dealing, and quantum meruit/unjust enrichment. Abira generally alleges that the Blue Cross defendants wrongly refused to pay for lab testing services, depriving it of millions of dollars. Abira expressly frames its suit as premised on “the contractual obligations which arose between Plaintiff and Defendants via the assignments of benefits executed by the insureds.” Eleven of the plans at issue are governed by ERISA, others are Medicare plans, and the remainder are healthcare plans that were privately purchased through the marketplace. Defendants removed the lawsuit to federal court. Abira believed the removal was improper and thus moved to remand its action to state court. Meanwhile, defendants moved to dismiss the complaint. The court in this order denied the motion to remand, and granted the motion to dismiss. It began with the motion to remand, and started by assessing whether plaintiff’s claims that pertain to ERISA-governed plans are completely preempted by ERISA. The court agreed with defendants that they were. Assessing the claims under the two-part Davila test, the court concluded that Abira could bring its claims under ERISA Section 502(a) as an assignee, and that the state law claims do not rest on any independent legal duty aside from the obligations set forth in the health plan documents. The court thus determined that removal was proper and denied the motion to remand. It then took a look at defendants’ motion to dismiss. Defendants presented three arguments in support of their motion: (1) the claims related to the ERISA plans are completely preempted by ERISA and Abira lacks standing due to valid and enforceable anti-assignment provisions within the plans; (2) the claims arising under the Medicare Act are subject to dismissal for failure to allege exhaustion of administrative remedies; and (3) the complaint fails to state a claim with respect to all three state law causes of action. The court agreed entirely. With regard to the ERISA-governed claims, the court not only found that the state law causes of action were completely preempted under Section 502, but also conflict preempted under Section 514, as none of the three state law claims could exist independent of the terms of the ERISA plans at issue. Notably, this case does not involve any independent contract or promise to pay between the parties absent the existence of the healthcare plans. Moreover, the court agreed with defendants that the ERISA plans contain valid and enforceable anti-assignment provisions which preclude Abira from asserting claims under the statute. It also stated that “there are no facts alleged in the complaint that suggest the anti-assignment provisions were waived.” Accordingly, the court granted defendants’ motion to dismiss the claims related to ERISA healthcare plans, and because amendment would be futile, dismissed them with prejudice. As noted, the court also dismissed the remainder of Abira’s claims for failure to exhaust and for failure to state a claim upon which relief may be granted. However, because these identified deficiencies may be cured through amendment, the court dismissed the non-ERISA related claims without prejudice.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Avila v. Metropolitan Life Ins. Co., No. 1:24-cv-0242-DAE, 2025 WL 1663104 (W.D. Tex. Jun. 12, 2025) (Judge David Alan Ezra). Plaintiff Lorenza Avila filed this action against Dell, Inc. and Metropolitan Life Insurance Company (“MetLife”) for recovery of her deceased husband’s life insurance benefits under ERISA. Ms. Avila’s husband worked for Dell and was insured under a group life insurance policy issued by MetLife. At the end of 2017 her husband took disability leave from Dell to undergo cancer treatment. The founder, chairman, and CEO of Dell Technologies, Michael Dell, even personally reached out to the family and offered to help them. Nevertheless, Dell did not inform the couple about the need to convert the group life insurance policy to an individual one. Because of this, the husband’s life insurance coverage lapsed and he had no life insurance coverage when he died in 2020. On this basis, MetLife denied Ms. Avila’s claim for life insurance benefits. In her lawsuit, Ms. Avila asserted a claim for benefits under Section 502(a)(1)(B) against MetLife and claims of fiduciary breach under Section 502(a)(3) against both defendants. MetLife and Dell each filed a separate motion to dismiss Ms. Avila’s complaint. Those motions were before Magistrate Judge Susan Hightower. Judge Hightower issued a report and recommendation recommending the court grant MetLife’s motion to dismiss the claim for benefits, deny both defendants’ motions to dismiss the fiduciary breach claims, and grant defendants’ motion to strike Ms. Avila’s demand for a jury trial. Defendants filed their respective objections to the recommendation. Ms. Avila, however, did not object to Judge Hightower’s findings. In this decision the court adopted in part the recommendation. As a preliminary matter, the court agreed with Judge Hightower’s finding that Ms. Avila does not have a claim for wrongful denial of benefits under Section 502(a)(1)(B). The court further agreed with the Magistrate’s jury trial analysis and therefore struck Ms. Avila’s demand for a jury trial. The court then discussed the breach of fiduciary duty claims. MetLife argued that it did not have a fiduciary duty to notify the family of conversion or porting options, and that Ms. Avila failed to allege any facts as to MetLife’s knowledge of her husband’s serious illness prior to his death to establish a fiduciary duty under the Fifth Circuit’s “special circumstances” standard. The court disagreed with the first argument. The court concluded that because MetLife argued that it provided conversion notice to the family, through its own discretion, MetLife acted as a fiduciary. Nonetheless, the court disagreed with Judge Hightower that Ms. Avila had alleged sufficient facts to infer that MetLife had a fiduciary duty to inform her late husband of his conversion rights based on its knowledge of his cancer. The court stated that the factual allegations regarding Dell’s knowledge of the husband’s illness prior to the insurance coverage lapse could not “be imputed onto MetLife for purposes of establishing a fiduciary duty under the ‘special circumstances’ standard.” The court stressed “that there is a difference between an employer (plan administrator) and claim administrator and whether they owe a duty to notify a beneficiary of his option to convert his plan.” Accordingly, the court concluded that the complaint fails to state a claim that MetLife had a fiduciary duty to provide notice of the option to port or convert and thus sustained MetLife’s objection to the recommendation. The court thus granted MetLife’s motion to dismiss. The breach of fiduciary duty claim against Dell was another matter though. The court adopted the Magistrate’s conclusions Dell was made aware of circumstances that suggest that silence about the need to convert would be materially harmful, triggering a duty to inform the family about their conversion rights. Therefore, the court held that Ms. Avila stated facts to state a plausible breach of fiduciary claim against Dell. As a consequence, the court overruled Dell’s objections and denied its motion to dismiss.

Pleading Issues & Procedure

Sixth Circuit

Doe v. Bluecross Blueshield of Ill., No. 2:25-cv-00608, 2025 WL 1648757 (S.D. Ohio Jun. 11, 2025) (Magistrate Judge Kimberly A. Jolson). Plaintiff Jane Doe is an employee of AT&T Services, Inc. and a participant in its healthcare plan administered by Blue Cross Blue Shield of Illinois. Her son, John Doe, is a beneficiary covered under the plan. When he was 19 years old, John Doe had a mental health crisis and was hospitalized. Doctors recommended in-patient treatment, and Jane Doe worked with Blue Cross to evaluate treatment facilities. Eventually, she concluded that Linder Center of Hope in Cincinnati could provide the best care for her son. Jane alleges that Blue Cross approved the treatment as medically necessary and informed her that her out-of-pocket costs would not exceed $15,000, per the terms of her plan. John Doe was treated at the residential facility for one month. The treatment cost was $47,200, which Jane paid in full. When she submitted the bill for reimbursement, Blue Cross paid far less than the amounts it had promised her during their pre-authorization conversations. After exhausting the plan’s administrative procedures to challenge the payment decision, Jane Doe filed this ERISA action seeking payment of the out-of-pocket costs she incurred in excess of the plan’s out-of-pocket limitation. At issue here was whether plaintiffs should be permitted to proceed under pseudonyms. Typically, such a request in a case like this is a non-issue, given the sensitive and private medical information at issue. But plaintiffs got some pushback in this decision issued by Magistrate Judge Kimberly Jolson. For one thing, Judge Jolson brushed aside plaintiffs’ arguments that they should be allowed to proceed anonymously given John Doe’s young age. The Magistrate wrote, “the fact remains that John Doe was not a child during his hospitalization nor when he initiated this lawsuit. Plaintiffs do not provide any caselaw saying the Court may consider this factor met when the plaintiff at issue is not, in fact, a child. Therefore, this factor does not weigh in Plaintiffs’ favor.” However, Judge Jolson took plaintiffs’ argument that the litigation will compel them to disclose information of the utmost intimacy about John Doe’s mental health condition more seriously. She noted that there is limited caselaw in the Sixth Circuit related to privacy concerns over a party’s medical history and whether those concerns allow plaintiffs to file cases under pseudonyms. Judge Jolson cited cases challenging Social Security disability decisions, which similarly involved detailed discussions of sensitive medical information. The district courts in those cases allowed plaintiffs to file their actions under their first name and last initial only. Magistrate Jolson decided to do the same. “In the end, the Court finds a middle ground sufficiently balances Plaintiffs’ privacy interests with the presumption in favor of open judicial proceedings. While they may not proceed as ‘Jane and John Doe,’ Plaintiffs will be permitted to proceed under their first names and last initial.” Judge Jolson held that this decision would strike a fair balance for the privacy concerns in this lawsuit and is a just outcome under the relevant considerations. Thus, plaintiffs were ordered to refile their complaint under their first names and last initial, and were informed that they may also pursue other avenues available to them to address worries about sensitive medical information, such as seeking protective orders or moving to seal filings from the public docket.

McDonald v. Brookdale Senior Living, Inc., No. 3:25-cv-00094, 2025 WL 1625654 (M.D. Tenn. Jun. 5, 2025) (Magistrate Judge Barbara D. Holmes). Plaintiff Monique McDonald brings this action individually, as a representative of the Brookdale Senior Living, Inc. 401(k) retirement savings plan, and as a representative of a putative class of participants and beneficiaries of the plan, alleging that Brookdale Senior Living Inc., the Brookdale Retirement Committee, and the committee members are breaching their fiduciary duties under ERISA and violating ERISA’s anti-inurement provision by using forfeited employer contributions for their own benefit. According to the plan’s Form 5500s from the years 2018 to 2022, those forfeitures were to be used first to restore previously forfeited accounts of former participants, second to pay the plan’s administrative expenses, and finally to offset any future employer contributions to the plan. Ms. McDonald contends that despite this directive the fiduciaries consistently used the forfeitures to reduce Brookdale’s contribution obligations to the plan. She adds that, to reflect this reality, defendants changed the language of the plan’s Form 5500 in 2023 to remove the priority use of forfeitures to pay the plan’s administrative expenses before offsetting future employer contributions. Ms. McDonald maintains that defendants’ conduct has harmed the participants of the plan and prioritized a benefit to the employer over the best interest of the putative class. In her complaint, Ms. McDonald asserts four claims: (1) breach of the duty of prudence; (2) breach of the duty of loyalty; (3) breach of ERISA’s anti-inurement provision; and (4) failure to monitor fiduciaries and co-fiduciary breaches. Defendants responded to the complaint by filing a motion to dismiss. Defendants’ motion to dismiss remains pending and is under consideration by Judge Richardson. Before Magistrate Judge Barbara Holmes here was defendants’ motion to strike Ms. McDonald’s demand for a jury trial. Defendants argued that there is no right to a jury trial in this case under the Seventh Amendment as Ms. McDonald’s proposed remedies are equitable in nature. Judge Holmes agreed. The Magistrate noted that courts in the Sixth Circuit have consistently held that ERISA claims are equitable in nature and therefore ineligible for a jury trial. Judge Holmes added that this holding is consistent with the Supreme Court’s ruling in Cigna v. Amara, wherein the court held that even relief in the form of money payments remain in the category of traditionally equitable relief, as courts of equity possessed the power to provide monetary compensation for losses resulting for a trustee’s breach of duty or unjust enrichment. Thus, Judge Holmes concluded that “[t]here is no question that equitable relief predominates in Plaintiff’s complaint.” Accordingly, Judge Holmes found that Ms. McDonald does not have a statutory or constitutional right to a jury trial and decided to grant defendants’ motion to strike her jury demand.

Provider Claims

Second Circuit

Emsurgcare v. Hager, No. 24-CV-6181 (JPO), 2025 WL 1665072 (S.D.N.Y. Jun. 12, 2025) (Judge J. Paul Oetken).  Plaintiffs Emsurgcare and Emergency Surgical Assistant filed this action in state court in California against Avery Hager, Oxford Health Plans, Inc., Oxford Health Insurance, Inc., and John Does 1-10 seeking reimbursement of the costs of emergency gallbladder surgery they performed on Mr. Hager in 2018. Defendants removed the action to federal court in the Central District of California. The Central District of California made two rulings. First, it dismissed all of the claims against Mr. Hager because their practice of “balance billing” was illegal under California law. Second, the Central District of California also held that transfer to the Southern District of New York was proper as to the claims against Oxford because the health plan at issue contains a forum selection clause mandating that actions be filed in New York courts. The Oxford defendants moved to dismiss the ERISA claim asserted against them. The court granted their motion, without prejudice, in this decision. To begin, the court agreed with defendants that the complaint contains only a bare assertion that Mr. Hager assigned his rights to the healthcare providers. Without further facts about the assignment, or language from the assignment of benefits, the court said it did not have enough to determine that assignment ever occurred. Putting that issue aside, however, the healthcare providers were up against a larger problem – the plan at issue contains an anti-assignment provision barring assignment of benefits in the vast majority of circumstances. The one exception to the anti-assignment clause is for “monies due for a surprise bill.” However, plaintiffs do not contend that their charge to Mr. Hager qualifies as a surprise bill. And the court was doubtful that it could under the terms of the plan. Thus, the court agreed with the Oxford defendants that the complaint currently fails to allege the necessary elements of a wrongful denial of benefits claim under ERISA. It therefore granted the motion to dismiss. However, because plaintiffs could potentially amend their complaint without amendment being futile, the court permitted the providers the opportunity to do so.

Fifth Circuit

Guardian Flight v. Health Care Service Corp., No. 24-10561, __ F. 4th __, 2025 WL 1661358 (5th Cir. Jun. 12, 2025) (Before Circuit Judges Smith, Clement, and Duncan). In 2022, Congress enacted the No Surprises Act to protect patients from surprise medical bills incurred when they receive emergency medical services from providers who are out-of-network with their healthcare plans. To achieve this goal, the No Surprises Act relieves patients from financial liability for these bills, and creates an Independent Dispute Resolution (“IDR”) process for resolving billing disputes between providers and insurers. During the IDR process, a certified independent dispute resolution entity serves as referee and selects the payment amount among the parties’ bids. The insurance company is then required to pay the IDR award within 30 days. The Department of Health and Human Services (“HHS”) has the authority to enforce an insurance company’s non-compliance in paying an IDR award. This has proven problematic. In the first year the No Surprises Act was in operation, providers filed more than thirty times the number of IDR disputes HHS anticipated. The Centers for Medicare and Medicaid Services (“CMS”) maintains an online portal through which providers may submit complaints regarding noncompliance with IDR awards. CMS has received thousands of complaints and has a substantial backlog of unresolved complaints. Understandably, emergency healthcare providers are unhappy with this mechanism Congress designed for resolving their disputes with insurers. They argue that the system, as it is currently functioning (or not functioning), is creating perverse incentives for insurers to simply not pay or to delay payment indefinitely. Two emergency air ambulance providers, plaintiffs-appellants Guardian Flight, LLC and Meds-Trans Corporation, experienced this firsthand when Health Care Service Corporation simply ignored the IDR award it was required to pay them. The air ambulance companies filed this action against Health Care Service Corp. “alleging it (1) failed to timely pay Providers thirty-three IDR awards in violation of the No Surprises Act; (2) improperly denied benefits to HCSC’s beneficiaries in violation of ERISA by failing to pay Providers; and (3) was unjustly enriched because Providers conferred a benefit on HCSC that HCSC has never paid.” Health Care Service Corporation moved to dismiss the complaint. The district court granted the motion to dismiss. First, it concluded that the providers could not assert a claim under the No Surprises Act because it contains no private right of action. Second, the court dismissed the ERISA claim for lack of standing, reasoning that the patients that assigned their claims to their providers suffered no injury because the No Surprises Act shields them from liability. Finally, the district court dismissed the quantum meruit claim, concluding that the providers did not perform their air ambulance services for the insurance company’s benefit. The providers appealed. In this decision the Fifth Circuit affirmed, agreeing with the district court on all three points. Like the district court, the Fifth Circuit concluded that the No Surprises Act does not create a private right of action, either expressly or implicitly. In fact, the Fifth Circuit concluded that it was clear Congress had chosen to design the law without a judicial enforcement mechanism. Perhaps, it theorized, Congress did so in order to not “throw open the floodgates of litigation.” For whatever reason, the Fifth Circuit was clear that Congress designed the law with an administrative enforcement mechanism to handle award disputes instead. Whether or not this was a good thing, the appeals court wrote that “the wisdom of Congress’s policy choice is beyond our judicial ken.” Accordingly, the Fifth Circuit affirmed the dismissal of the claim under the No Surprises Act. It then turned to the providers’ ERISA claim. While the providers satisfied the derivative standing requirements to sue under ERISA, the Fifth Circuit agreed with the lower court that the problem with standing centers on the fact that the beneficiaries themselves would not have standing to sue under Article III. The court found the fact that the No Surprises Act shields the beneficiaries from liability for any coverage costs means the patients suffer no concrete injury when their insurance company fails to cover medical bills that fall within the scope of the Act. The providers argued that the beneficiaries are harmed because they suffer a breach of contract and are denied a benefit of their agreement with the insurance company. But the Fifth Circuit was not moved by this “technical violation,” and concluded it does not amount to actual harm sufficient to confer Constitutional standing. In short, the Fifth Circuit agreed with the lower court’s dismissal of the ERISA claim. Last, the court of appeals held that the district court properly dismissed the quantum meruit claim. Under Texas law, the Fifth Circuit stated that healthcare services are undertaken for the patient’s benefit, not the insurer’s. “The district court was right. Providers did not render any services for HCSC’s benefit.” For these reasons, the Fifth Circuit affirmed the district court’s dismissal of all three causes of action, leaving the air ambulance companies without an avenue in the courts to receive payment from Health Care Service Corporation. Congress wanted No Surprises, but this decision may come as somewhat of a surprise to providers who expected to have their IDR awards paid.

Ninth Circuit

County of Riverside v. Cigna Health and Life Ins. Co., No. 2:24-CV-10793-SPG-MAR, 2025 WL 1671887 (C.D. Cal. Jun. 13, 2025) (Judge Sherilyn Peace Garnett). This action by Riverside University Health System seeks to recover $1.475 million in unreimbursed medical bills from Cigna Health and Life Insurance Company and Cigna Healthcare of California Inc. The Hospital filed its action in California state court asserting only state law causes of action premised on Cigna’s alleged violation of California’s Knox-Keene Act and California common law. The Knox-Keene Act requires healthcare plans to reimburse medical providers for the reasonable costs of emergency medical services. “And Plaintiff’s common law causes of action are based on Plaintiff’s treatment of the patients and Defendants’ alleged acceptance of payment responsibility for such treatment.” Notwithstanding the fact the Hospital raises no claim for relief based on the purported assignment of ERISA benefits and the fact the complaint explicitly disavows any claims based on the patients’ rights to benefits under ERISA plans, Cigna removed the action to federal court arguing that ERISA completely preempts the provider’s state law causes of action. The Hospital moved to remand its action back to state court. Because the court agreed that Cigna could not satisfy its burden on the second prong of the Davila preemption test, the court granted plaintiff’s motion to remand. The court ruled that regardless of the existence of assignments of benefits, the Hospital was not required to assert its right to relief under the terms of the ERISA plans. Instead, it was permitted to assert causes of action premised on the independent legal duties imposed by the Knox-Keene Act and California common law. The court stressed that it is a plaintiff’s “prerogative to choose which claims to pursue.” Moreover, the court disagreed with Cigna that any cause of action premised on the Knox-Keene Act is automatically preempted by ERISA. “Thus the Court agrees with Plaintiff that its causes of action ‘would exist whether or not an ERISA plan existed.’” Accordingly, the court determined that the complaint is not completely preempted under Section 502(a) of ERISA. Therefore, the court granted the Hospital’s motion to remand its action to Los Angeles County Superior Court.

Valley Children’s Hospital v. Cigna Healthcare of Cal., Inc., No. 1:25-cv-00337-KES-EPG, 2025 WL 1665058 (E.D. Cal. Jun. 12, 2025) (Judge Kirk E. Sherriff). Plaintiff Valley Children’s Hospital brought this action in state court against Cigna Healthcare of California, Inc. and Cigna Health and Life Insurance Company to recover payment from Cigna for medically necessary services it provided to 151 patients who were enrolled in health plans sponsored by defendants. The Hospital alleges that it formed implied-in-fact contracts with Cigna for each of these patients to whom it provided medically necessary treatment, but that Cigna did not fully reimburse it in accordance with those promises. The Hospital asserts only state law claims in its complaint, namely breach of implied contract and quantum meruit. Cigna removed the case to federal court based on federal question jurisdiction, asserting that the state law claims are completely preempted by Section 502(a) of ERISA. Valley Children’s Hospital moved to remand its action back to state court, while Cigna moved to dismiss the complaint based on Section 514(a) conflict preemption. The court determined that neither prong of the two-prong Davila preemption test was met because the Hospital could not have brought its claims under ERISA and because those claims are based on an independent legal duty. The court held that “[t]his case is on all fours with Marin General Hospital v. Modesto & Empire Traction Company, 581 F.3d 941 (9th Cir. 2009).” There, as here, the Hospital plaintiff sued for reimbursement of benefits not based on the terms of the patients’ plans, but rather, under the terms of implied-in-fact contracts. Given this fact, both the Marin court and this district court concluded that the state law claims were not based on obligations owed under ERISA-governed plans, as they would exist whether or not the ERISA plans existed. “Thus, regardless of whether the Hospital could have brought a claim under ERISA, the Hospital could not have brought these claims under ERISA. The Hospital’s claims are based on independent state-law duties: those allegedly imposed by an implied contract or the theory of quantum meruit. Thus, neither prong of Davila is satisfied, and the Hospital’s claims are not preempted.” Finding that the doctrine of complete preemption does not apply, the court determined that it lacks federal question jurisdiction over this matter and so granted the Hospital’s motion to remand. Consequently, Cigna’s motion to dismiss was denied as moot.

Remedies

Ninth Circuit

Su v. Bensen, No. CV-19-03178-PHX-ROS, 2025 WL 1634940 (D. Ariz. Jun. 9, 2025) (Judge Roslyn O. Silver). The former acting Secretary of Labor, Julie A. Su, brought this action against the three owners of a company that rents recreational vehicles to the public, alleging that they knowingly participated in fiduciary breaches and engaged in a prohibited transaction in the creation of the RVR Employee Stock Ownership Plan (“ESOP”) and during the ESOP’s stock transaction. Following a 16-day bench trial, the court issued its liability decision on August 15, 2024, holding “that Defendants were the beneficiaries of a ludicrous one-sided transaction” wherein the plan overpaid $72 million for the stock, and finding in favor of the Secretary on all of her claims against the selling shareholders. (Your ERISA Watch covered that decision in our August 21, 2024 newsletter). The case subsequently proceeded to its bifurcated second phase on liability and remedies. The parties presented competing narratives over the harm suffered by the ESOP and the appropriate remedies. Before considering the parties’ discussions on various topics, the court first addressed defendants’ arguments that the ESOP has not been damaged. Defendants raised four arguments in support of this proposition: (1) the ESOP has not paid the full loan for the purchase of the RVR stock; (2) the ESOP has only been making annual payments of $4.72 million per year for the stock purchase and only $14.78 million to date; (3) RVR’s stock has outperformed internal projections created prior to the ESOP; and (4) the $20.5 million that Reliance Trust paid to the ESOP in settlement is a windfall for the ESOP when considered with the other elements of the transaction. The court disagreed with each point. First, the court stated that the structure of the ESOP loan is not evidence of a lack of harm to the plan, as indebtedness by an ESOP has immediate consequences. It stated that because of this, “courts have held that, under ERISA, loans owed by ESOPs are counted towards an ESOP’s damages at the time the loan is held, not when the ESOP repays the loan.” Relatedly, the court disagreed with defendants that reformation of the loan is an appropriate remedy here. The court also found that the structure of annual payments doesn’t indicate that the ESOP failed to suffer a loss from overpayment at the time of the purchase of the RVR stock. As for the post-transaction performance of the RVR stock, the court agreed with plaintiff that the subsequent stock gains are irrelevant to the loss incurred by the ESOP at the time when the fiduciary breach occurred and therefore should not be considered or used to offset losses. Further, the court disagreed with defendants that the Reliance Trust settlement presents a windfall to the ESOP. However, per the agreement upon terms of the settlement, the court agreed to reduce the judgment against defendants by the amount of that settlement. Having rejected defendants’ arguments that the ESOP had not been harmed, the court proceeded to its discussion of the appropriate remedies. First, the court took a moment to clarify that it had “made the necessary and substantial findings of fact to find Defendants liable as co-fiduciaries and for knowing participation in a prohibited transaction” in its liability decision. Next, the court agreed with plaintiff that the proper measure of loss here should be calculated by subtracting the fair market value of the stock as determined by the court ($33 million) from the inflated price paid by the ESOP (“$105 million). Accordingly, the court held that the ESOP overpaid by $72 million. The court also decided that defendants are not entitled to an offset of the damages award based on their own compensation because “Defendants have not proven they are entitled to the salary they claim, that such salary was deferred or waived for the purpose of RVR or the ESOP, nor that the ESOP benefitted in any way from their deferral of salary.” Notably, the court left unresolved two important issues. Rather than decide whether lost opportunity damages are warranted here, and if so, what rate of prejudgment interest should apply, and whether disgorgement should be awarded, the court instead chose to resolve these issues in a second trial. The court then discussed the topics that defendants requested it rule on. The court held that under Section 502(1), the Secretary is entitled to recover the 20% civil penalty for the fiduciary breach claim, and that the complaint did not need to specifically plead such a demand for relief because the statutory framework indicates that the penalty is an automatic consequence of recovery and at the discretion of the Secretary. Defendants also argued that the only appropriate remedy here is to order recission of the transaction wherein they return the purchase price to the ESOP and the ESOP returns the RVR stock to them and pays off the ESOP loan. The court disagreed, stating, “Defendants have not established how recission would be an equitable remedy here, nor have they cited any case like this one in which recission was ordered.” Accordingly, while the court resolved many of the issues raised by the parties in this lengthy decision, it left some key ones for resolution at a second trial, and the ultimate question of what remedy is appropriate remains unanswered for now.